U.S. court rules "temporarily blocks removal of Fed Governor Lisa Cook"

"Under the Federal Reserve Act, grounds for removal are interpreted as 'misconduct while in office'"

The Trump administration is highly likely to appeal to the conservative-leaning Supreme Court

A U.S. federal court has temporarily barred President Trump from removing Lisa Cook from the Board of Governors of the Federal Reserve.

On the 10th (local time), Reuters reported that Judge Zia Cobb of the U.S. District Court in Washington, D.C. said the Trump administration's allegation that Cook committed mortgage fraud before assuming her role as a Fed governor is unlikely to constitute sufficient grounds for removal.

In the opinion, Judge Cobb wrote, "President Trump has not identified any facts showing that Cook, in her actions or performance as a Fed governor, acted dishonestly or performed her duties so ineffectively as to harm the public interest."

Because of Judge Cobb's ruling, the Fed cannot take steps to carry out her dismissal while Cook's lawsuit proceeds.

Cook's attorney Abby Lowell said in a statement, "This ruling recognizes and reaffirms the importance of protecting the independence of the Federal Reserve from unlawful political interference."

The law that established the Federal Reserve stipulates that a Fed governor may be removed only "for cause." No U.S. president has ever removed a Fed governor, so this law has not been tested in court.

Judge Cobb stated, "The best interpretation of this law is that it permits removal of a Fed governor only if removed for misconduct while in office." All the mortgage fraud allegations against Cook relate to actions she took before she became a Fed governor in 2022.

This case is likely to be appealed by the Trump administration to the U.S. Supreme Court. In any case, it is expected to affect the Fed's interest-rate decision process.

With U.S. employment conditions showing a much sharper deterioration than expected, the Fed is expected to cut rates at its policy meeting on September 16 and 17.

President Trump and William Pulte, the Federal Housing Finance Agency director he appointed, claimed that Cook inaccurately described three properties on mortgage applications to obtain lower interest rates and tax deductions.

However, in the lawsuit Cook filed against President Trump and the Fed, she argued that these claims do not give Trump legal authority to remove her and are a pretext to fire her because of her positions on monetary policy.

Meanwhile, the U.S. Department of Justice has opened a criminal mortgage fraud investigation into Cook and has issued grand jury subpoenas in Georgia and Michigan.

Cook, the first Black woman to serve on the Board of Governors of the Federal Reserve, denied the fraud allegations in documents filed with the court, saying, "I have never committed mortgage fraud." She also argued that even if the allegations were true, the alleged actions occurred before she was confirmed by the U.S. Senate and therefore are not grounds for removal.

Guest reporter Jeong-A Kim kja@hankyung.com